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Bitcoin miners- which make up a sizeable portion of the token’s holders, are likely to sell more of their holdings as mining profitability slumps.
Data from Bitinfo shows that average mining profitability is roughly 10 cents a day for 1 transaction hash, close to record lows. A sharp tumble in Bitcoin prices, coupled with rising energy costs this year have severely impacted mining profitability.
Bitcoin has slumped over 50% this year, and is now down about 73% from its November high- trading around $21,000.
While major miners were seen dumping their holdings through May and June this year, prolonged weakness in prices and profitability may spur more offloading.
Bitcoin prices could stay subdued on more miner selling
Investment bank JPMorgan said in a recent note that Bitcoin prices will stay subdued if miners keep offloading their holdings, Bloomberg reported.
JPMorgan analysts cited a tangible risk that miners could continue offloading their tokens, given their limited exposure to capital markets. Publicly listed miners Marathon Digital and Riot Blockchain both sold more tokens than they mined in May, according to data from Arcane Research.
Earlier this month, Bitcoin miners had moved a record $1.7 billion onto exchanges, likely to sell. The token had slumped below $20,000 shortly after.
The trend reflects the extremely bearish conditions in the crypto market, given that miners are usually the last to sell their holdings.
Selling by miners indicates a bottom may be in
But given that miners are the last to sell during a bear market, their current selling spree could indicate that a bottom is in sight for the world’s largest cryptocurrency.
Bitcoin prices will likely see more losses before reaching a bottom, given that most miners will be offloading tokens at substantially lower prices.
Jitters over insolvency in crypto lender Celsius and hedge fund Three Arrows Capital has also made several traders hesitant to buy.
A dearth of positive cues is also expected to keep Bitcoin in a bear market for the medium term.
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